Transcript of The Right Financial Decision Starts With Understanding the Problem

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Normal is broke and common sense is weird, so we're here to help you transform your life. From the Ramsey Network and the Fairwinds Credit Union studio, this is The Ramsey Show. I'm George Campbell, joined by Jade Warshaw, and we're taking your calls at 888-825-5225. You can't tweet You can't tweet it in, you can't call it in.

Sometimes we do take the social ones.

That is true. And you can leave us a voicemail, but that's less fun. So call in live. We've got some open phone lines here, 888-825-5225. Tawny is in Bismarck, North Dakota to kick us off. What's going on, Tawny?

Hi, thanks for taking my call.

Sure.

Um, so basically my whole world imploded on me recently.

Oh no.

That my husband, we've been together for 15, married just over 10. We have 2 boys, um, that he's been cheating on me, um, for at least 2 years physically, online, who knows how long.

Mm-hmm.

But we, again, we have 2 boys and all of our assets are combined.

We had—

we have no debt except for our house. Well, so I thought, because another layer to it is he has been hiding a significant amount of credit card debt.

Yeah, I bet having this relationship on the side is costing him.

Yeah, yeah.

And it—

yeah.

And so I'm trying to figure out how to move forward with not only that credit card debt. It doesn't have my name on it, but we're married, so It— I'm responsible for it too. And then, well, you may not be with that.

I think if I'm the judge, I'm, I'm gonna go, well, you're an innocent spouse and, uh, he's taken on this credit card debt as part of the, you know, judgment. Uh, what are you gonna do next?

I don't know.

Have you spoken to an attorney yet, Toni?

Not yet. Not yet.

I think that might be my first order of business.

Day by day.

Yeah, I would see what, you know, and every state has different laws, but I just want to make sure that there's no rash decisions here out of fear or anger that could hurt you later on. And so I think talking to an attorney going, hey, what can I do and should I do legally to protect myself during this awful season that you're going to find yourself in cleaning up this mess? Have you guys talked to each other? How did you find out about all this?

Well, I had, uh, lost my phone basically, and he was sleeping, and so I grabbed his phone and I saw a Snapchat, a suspicious-looking Snapchat, and I kind of— led me to snooping in his phone. First time I've ever done that in 15 years.

Wow.

Um, yeah.

How old are you guys?

He's rough.

33.

Wow.

I'm sorry this is happening. This is devastating. I mean, I can't imagine waking up in your shoes, so Um, just the fact that you're trying to keep it together, you know, good on you. How old are the boys?

They are 10 and 6.

I'm so sorry. Do they know about this?

They don't know the details. They just know mom and dad are, are going through some things and dad moved out.

Okay.

Um, but we're, we're trying to keep it as, as civil as possible. I think I have all the reason to be the crazy one, but I don't That's just gonna make things worse.

It's not gonna help. I think my first order of business would be, like I said, I'd find an attorney. I'd ask in my circle of friends, and who do we know? Who, you know, who did Jeff use for his divorce? You know, asking your circle of friends and find somebody recommended, uh, an attorney that you can speak with. And then the next thing is I'd be looking for a counselor, uh, and I'd be speaking with a counselor. And I'd also ask, what do you think about the kids? What's the best way for me to approach this with the children? Just to make sure everything's being handled with as much care. I think you're probably doing a fantastic job, but just to make sure everything's being handled with the most intentionality that we can muster up.

Mm-hmm.

And then from there, it's about letting the, you know, your attorney kind of guide these proceedings and guide, okay, how, how do we bring up divorce? What's the best? Because I think that if you, and it's not to say that anything has to get muddy or ugly, but I think if you're going to try, because I see on my screen you're asking, how do I sell my house? The answer is right now you're not. You know, I wouldn't try to do anything with moving money, selling assets. I, I just wouldn't do that until speaking to an attorney.

Okay.

Are you paying the mortgage yourself right now, or is he, um, helping? What's going on there?

Yeah, he's helping. Like, um, he basically just started his own account, and then he's just splitting his paycheck 50/50 to go into the joint account for bills and stuff.

Okay.

Okay, good. So he's, he's got a mind that he wants to keep taking care of the kids. He's not completely just—

He's not gonna like drain the account and flee the, the state?

No.

Okay.

No, I know. I think he, he knows he's the one that really screwed up here, and he's not gonna do anything to make it any worse for himself.

Well, that's good.

And both of your names are on the deed of the house?

Yes.

Okay.

And is he down to sell this house? Would he be cooperative in that? To sign the paperwork needed?

I think so, but we have so much renovating to do with the house before we could really make a good gain on it.

Okay, how much equity do you have right now?

Um, we have about $100,000 equity in it now.

Okay, and do you work outside the home?

Yes.

Okay, what do you make?

I make about $85,000.

Fantastic. So what I would be doing, Tawny, is just trying to forecast what the future might look like with this new chapter for you and these boys going, hey, if I am on my own 6 months from now, what is life going to look like financially? And I would start to craft a budget around that and start seeing, hey, what would rent be if we sold the house and I rented somewhere? What kind of place would I need? How much would that cost? Can I afford all of this without needing any income from him. Now, maybe there's going to be child support, alimony. I don't know the full story, but I would sort of try to create this independent island in case this thing doesn't go well.

Yeah.

But there's no easy way to deal with the situation other than taking it one step at a time. So I would make a list of all the things I need to do to get it out of your head. Because right now everything is swirling, everything is emotional. You're gonna have moments where you just need to lay down. So don't feel like you need to do this alone and don't feel like you need to figure it all out day one.

That's what I've been trying to do. Yeah. The first day I'm like, we're screwed. We're not gonna make it through this. I'm gonna be homeless.

Well, I like George's idea because it is gonna help out. And just to put even a little bit more on that, what I would do tonight, and we can help you walk through a little of this, I would just list out all the assets, list everything out and just split it in half for now and say, okay, if there's this much debt, I'm gonna assume that I'm on the, the hook for half of that, half the assets, and then kind of do that net worth equation and decide, okay, what's left? And then from there, that'll kind of give you— because I've heard Dave say this and I believe it's true. When there's no knowledge, your brain just kind of makes things up and fills in the gaps and you start freaking out and wigging out. So as much as we can pull some hard numbers and hard facts, that's going to help give you some peace. Even if it's not pretty, it's still going to give you peace because you actually know the answer. So I would do that tonight. And then along with that budget, what are you bringing home? $5,700 a month? Is that about right?

Well, I pay all the health insurance and—

So that comes directly out of your check. So whatever, whatever your take-home amount is, plug that into EveryDollar. We're going to give you that for free, at least for the next year, just to help you see and start planning out. Go online and go, well, how much does a 2-bedroom apartment cost? And just start to answer some of these questions that are floating around in your head. I promise it's not going to be fun. But it will give you peace.

Yeah, we always say that divorce turns a marriage into a business transaction. And so now it's just, how do we do this as cleanly as possible without affecting the kids and not dragging them into this mess that was created? I'm so sorry, Tawny. We are rooting for you to get through this.

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Chris is in San Diego up next. Chris, what's going on?

Hey, how's it going, guys?

Good.

Doing well.

How can we help today?

Yeah, so, uh, I've recently been having some trouble. Uh, so I recently had like, I would consider her a low-maintenance girlfriend at the time. She was pretty easy on the budget. But as things have gone increasingly a little more serious, my budget has kind of expanded on the EveryDollar app.

That's a nice way to put it.

Yeah. So I was just going to ask, how do you guys account for those things? Because now every month I'm having to siphon off other categories. My restaurant budget now is just her allotted budget at this point. I'm just trying to do extra things for her.

So how is this like, explain to us start to finish. Is she texting you like, hey, we're going out to eat tonight?

Uh, it's a little less of that and more of like, I somehow got tricked into like paying for extra things. So like—

Like what?

It was finals week. Uh, so she was like very tired. So I was like just buying her coffee every day.

But was that on your volition or was she asking for it?

Uh, it's my volition.

Okay.

For sure.

'Cause I don't want to dog her and be like, wow, she's terrible. It sounds like you just feel this pressure to, Spend.

Yeah, tell us what— tell us what type of money you're spending on her on a weekly basis. Like, we, we go to a— we go to a dinner and the dinner is $90, and then I spend coffee on her and I probably get her 5 coffees a week. That's, you know, $69. I don't know how much coffee is, but give us some ballparks here.

Yeah, sure. Uh, so I think every month has been a little different. Just, uh, like this month has been like her birthday and then finals, so it's been a little more expensive.

What'd you get her for her birthday?

Uh, a spa package.

How much?

Uh, roughly around $450 to $500.

Dang.

Wow.

Okay.

Well, now here's the problem, Chris. You just set the tone and the bar. Yeah, you sure did. 'Cause now next birthday it's gotta be at least $500 worth.

You did. You set the bar early, my friend.

It's not flowers and chocolate next time.

Yeah, I, I, I kind of got a little screwed over here. We started dating around Christmas time.

Oh.

So I kind of had to get a Christmas gift. So like that kind of put me in the hole a little bit too.

Okay, so I will start out by saying this, 'cause I want you to know who you're dealing with here. I believe in wooing, and I believe in like, wining and dining. I do believe that. I love that as part of courtship. So there's part of me that I feel like you're just doing everything right. It costs money to have a girlfriend, just like it costs money to have some of the other things you enjoy having. So there's part of this that I do think there's, You know, there's a toll here. Um, now the question is, is it bothering you because you're in debt and you need that money to pay off debt? Uh, or why is it bothering you that you're shelling out this money? Tell us about your financial situation.

Yeah, sure. Uh, so she's the one who brought, uh, brought me onto the Ramsey stuff. Uh, so for me, uh, I think it's a mixture of like, I'm trying to be like, you know, I, I got a budget for her, but like this month I just blew right through it, right? For the birthday. So I don't have that much debt. I think I have, according to here, I mean, outside of the mortgage is about $35,000 in debt. I do have a CD that's about $100,000.

Oh.

I won't be able to access it till August or July, but the plan was to use that to pay off the debt and then start investing a little more aggressively. But that's the plan. But I was just trying to figure out like my budget, like has been just changing every month. Like some months are lower than the others. Some months are higher. And also just trying to balance that with—

Well, you're— you set the budget. You're the boss of the budget. And so it's your job to say, all right, I'm gonna spend $200 for this birthday and no more. And then you figure out how to do that. But instead you're going, well, I really want to get the spa package. Is it to impress her? I mean, I don't— it doesn't sound like she has crazy expensive taste and you're just trying to appease her.

Yeah, I think for me it's— yeah, I'm trying to appease, uh, for sure. It's, uh, not the so much expensive dates, but I guess, uh, the way her schedule works out, we don't have as much time to spend, so it kind of makes it a little more sense to like go a little extra step.

So you're trying to buy her love since you can't do it with your physical presence?

I don't think there's anything wrong with you saying— like I said, I, I love wining and dining, but I also love a budget and I love financial goals. I think if she's a good match for you, you should be able to say to her, I love being able to take you out, I love being a gentleman, I like being able to, you know, practice chivalry and pick up the Still, that being said, my budget is kind of limited. I just want you to know so that if there's something that maybe we're— you're used to us doing and we don't do it that week, that's the reason why. It's not that I'm not into you anymore, it's just I gotta pay off my debt. And I think you should be able to say that, uh, at this stage in the relationship and it be received, because she probably has things— at least she should— on her end that are similar. Financially. Like, yes, I'd like to do my financial goals too. So I think another human being should be able to understand, uh, that type of statement.

What a fun question, Chris. Thank you for that.

And you do, by the way, once that CD lets, lets him in, he needs to pay off that debt.

At its full maturity. And I would look into what the actual penalty is, because if it's a nothing burger and you're just missing out on some interest, I would pay off that debt today.

Yeah, because sometimes it really isn't anything. It just kind of stops. Other times there might be a withdrawal penalty there.

There's different rules on that. So I'd look into that. But I think if she turned you on to the Ramsey plan, it's an easy Easier conversation.

Oh yeah.

Because you go, hey, listen, I've been wining and dining and I realize I've been blown through my budget every month. I got to get this thing under control. Date nights might look a little bit different for the next year as I clean this up.

Can I tell you a real life story?

Okay. Is this going to be good?

Maybe.

You got that smile of mischief.

It's just a memory that I see in my mind right now. When I first met Sam, he, my husband, he lived in a townhouse, obviously alone, and he was showing me around his house for the first time. And I was struck because he just had a pile of cash that he kept. He just— savings. He just had— he had a lot of things in piles. He would have like on a table, papers and piles. Yeah.

No, no, no.

It was in his closet. It was just stacked up money. And let me just tell you, Sam definitely wooed me. He wined and dined me, and I could actually see the stack of cash going down, down, down as he continued to date you. Yeah, yeah, yeah. It's so funny. And then he finally did propose. He proposed 6 months into dating. And yeah, and by then he needed to get a paper route because he'd gone through his savings. And so he had to get a paper route to buy my engagement ring.

Did he not know about a savings account?

Listen, did we know anything back then? We had no idea.

But he's not like a 78-year-old man with tin cans in his backyard. That's funny. All right, I gotta razz him for that next time I see him. I know you should. All right, Justin is in Simi Valley, California up next. What's going on, Justin?

Hey guys, how you doing? Thanks for taking my call. Appreciate it.

Absolutely.

How can Jade and I help?

I'm super excited to talk to you guys.

Um, so we're—

my wife and I are about to be on Baby Step 4, which I'd love to share how we did that. Um, we're both educators and contribute to CalSTRS. Um, we're contributing about— and to our 403 as well as the CalSTRS through work, which equals about 10%. Once we get to Baby Step 4, do we bump up our 403 contributions, invest more in mutual funds, open up a Roth? Um, just kind of excited about getting to Baby Step 4 and what do I do when I get there?

I really love that question. And just for the listening audience, Baby Step 4 is the baby step after you've paid off your debt, after you've saved up 3 to 6 months of expenses where you get to invest 15% of your gross income. That is the amount before taxes, before insurance, before all that good stuff comes out. And to answer your question, Yeah, and Baby Step 4, I would bump that up to 15%. Um, and if you're already maxing out the 403, uh, at the 10%, I would move to a Roth IRA. But if your 403 isn't Roth, I— and if there's no match, I would do the Roth first, and I would go to those funds first and max that out, then go over to the 403 if you can. I don't know if—

Do you have a match in the 403?

No, it's not a match. It's just whatever, whatever we put into it.

Okay. And then is there a Roth option for the 403? Have you looked into that?

There isn't. So I was with a previous school district and I took that 403 and I was able to convert that to a Roth because I separated from them. So my company was able to do that, but I'm not able to do that on a day-to-day. So it's just a straight 403. I'm not able to open a Roth through there.

So if there's no Roth option and no match, I would go straight to the Roth IRA first and fund that. And if you still haven't hit 15%, Then go back to that 403 and contribute there.

Oh, that sounds, that sounds perfect. I'd love to share with you guys just how we got here. Do you have time?

I got 20 seconds.

Okay, speed round. So I did Total Money Makeover in 2025, um, put it away, thought Dave was way too strict. Um, in 2026 I went back to it for— I sold my car, uh, bought a car cash. Um, we paid off $53,000 in debt. We have a rental house that we're selling. It's in escrow now. Once that goes through We're wiping out that individual step for us.

Yeah. Way to go, man.

I love that.

Dude, these are teachers, educators, and it's the number 3 career path for millionaires.

That's great.

In our millionaire study, we love to see it. So it's about what you do with the income, not making a high 6-figure salary. Mm-hmm. Because those people are generally broke. The teachers, they got control of this money. Way to go.

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Welcome back to the Ramsey Show. Right before the break, we were talking to a fella who was asking, hey, how do I invest with Baby Step 4? And I've got a 403 through my employer and the Roth and the match.

It's a lot.

We were throwing out lingo left and right. And so we thought we'd just take a moment to help explain some of this in layman's terms, because it is confusing and it can be overwhelming. And I don't want that to stop anybody from building wealth.

Yeah, that's right. And we teach over here, obviously Baby Step 4. I told you guys the last segment, and we say, when you do start doing Baby Step 4, you're investing 15%. We like for you to start with an employee-sponsored account. So if you just have, you know, a regular 9-to-5 W-2, it's usually a 401. With teachers, we see 403s. Military has something different, but most professions have their version of a 401.

And that's just literally the section of the tax code that says you can have an employer-sponsored retirement plan. So Section 401, Subsection K.

Yes.

That's it.

And then from there, there's different tax treatments on it. So we've got the traditional that we talk about all the time, and that's just saying, hey, you are, adding money into this account, uh, before you've paid money, before you've paid taxes on that money. It's pre-taxed dollars. And people go, okay, great, like that's one option. And then there's the Roth option that we talk about that we tend to favor because this is the option where this is after-tax dollars. You've already paid the taxes on this money. We love that because when the time comes later on in life after retirement, when you want to pull that money out, you don't have to pay taxes because you've already paid them.

Yeah, think about your take-home pay. The government already took their cut, so I'm using my take-home pay to fund this retirement account, and Uncle Sam says, all right, you paid us once, you don't have to pay us again.

Yes, great.

So if there's $2 million in a Roth 401, that's like $2 million of net income. Yes, because you're not paying tax on that.

And that's great, especially if we're talking about leaving that money to heirs and things like that. That's also so, so important. Uh, you mentioned the match earlier. We asked him, do you have a match from your employer? We can talk about that, George.

Yeah, so that we say match beats Roth beats traditional for a very simple reason. Match is an instant return on your money. So At Ramsey, you know, if I invest 4%, Ramsey's gonna give me 4% to match that. So I just got 100% return right there. Now, some might say we do 50%, uh, up to a certain amount. So it might be different based on your employer, but many employers have a match. So we always tell people, take that first when you're ready to invest, then go to the Roth options because you're gonna have that tax-free growth.

That's right.

And then move on to traditional if you haven't hit that 15% mark yet. And the last thing I'll say about this, Jade, is people message me and they go, I'm so confused. Is it 15% of my income or our income? And I say, both. It doesn't matter. So Jade and Sam are investing. Jade invests 15% of her income. Sam invests 15% of his income. How much of their household income are they investing?

15%. It's the same. Ding, ding, ding.

Because people go, well, I'm doing 7.5%. She's doing 7.5%. I'm like, no, no, no, no. That's just 7.5% total of the whole pie.

Yeah, no.

So all the money together, 15%, 15% of his, 15% of yours, 15%.

Again, if you don't have an employer-sponsored plan or you don't have a Roth option, you can always open a Roth IRA. And that is just a non-employer retirement plan that anybody can open as long as they have earned income. Your 17-year-old working at Burger King can open up a Roth IRA and start investing there. And the limit for this year is $7,500. So that's why we said if you fill that up and you still haven't hit 15% of your household income, Then go back to traditional options. And if you make too much, there's contribution limits for the Roth IRA.

That's right.

You can look into a backdoor Roth IRA, which sounds, you know, sneaky. It's not that sneaky. It's a very legal loophole to where you just, you basically fund an after-tax traditional IRA and then immediately convert it over to Roth.

Yeah, I like that. And while we're here, let's just hit on what happens if you have a 401 connected to your job. You leave your job and now that 401 is sitting there. We had a call about that yesterday, George.

Yeah, so we always tell people you don't want to see that money because if you do, you're going to have some taxes and penalties and fees attached to it because it looks like an early withdrawal in the eyes of the IRS.

Right, let's hit that real quick. Obviously, if you've invested this money, it's, it's expected to be there until 59 and a half, which is like legal retirement age. So if you pull it out early, it's an early withdrawal. You're going to get hit with that penalty. Plus, uh, 10% just for pulling that bad boy out.

So what you want to look into is a direct rollover IRA. And what that means is the money is moving from your traditional 401 directly over to a traditional IRA. And same with Roth.

It never sees the light of day.

You want to keep the flavors the same. So if it's a Roth 401, move it to a Roth IRA. Direct rollover is what you want. Make sure that you've checked that box before you just Send money to your bank account and then go, oh my gosh, I didn't know what I just did.

Yeah.

Yeah.

That's a hard one to undo.

All right.

I feel like we covered it. So there was our Investing 101 in about 4 minutes. We did our best.

All right.

Mike is in Salt Lake City up next. What's going on, Mike?

Uh, hey there.

Thanks for taking my call.

Sure.

Um, so I'm just finding myself in a situation here. I've been, I've been Taking the steps towards starting my own business, doing carpentry work and other construction jobs for the last couple of years. And, uh, we decided to purchase a home this spring and in our area, about an hour from Salt Lake, it's, uh, there's a lot of opportunity for me in construction. There's a lot of, not a lot of affordable homes. So we bought a home on the edge of our budget and we're paying about $3,800 a month, a month for our mortgage. And I've calculated the rest of our expenses at about $3,000 after health insurance and gas and everything like that. Um, we currently have $15,000 in a securities-backed line of credit against my index funds that value $105,000. Otherwise we're debt-free. And I was curious also, we have a baby coming in December here. So, all right, just, yeah, just kind of seeing if you guys think it's the right time for me to jump into this business, um, and kind of just getting a little overwhelmed with our overhead right now. I don't want to sell the house. I'm not ready to think about that just because we do have some runway.

Um, what's your take-home point?

It's gonna be hard for What's that?

What's your take-home pay every month?

My take-home pay was, uh, about $70,000 a year before I left my, uh, before I started doing more of my own work. And now it ranges from about $1,500 a week. Uh, so 7 or what's that, $4,500 or $6,000 a month to about $10,000 a month, um, depending on the month.

And is your wife working outside the home? Does she plan on staying home after the baby's here? What's the plan there?

Uh, she does work outside of the home. She makes about $1,200 biweekly, $2,400 a month, and, uh, commutes about 30 minutes. And I think between childcare and the commute and the opportunity cost of her being able to be home to, uh, keep our expenses down, I think it's best that she doesn't work once the baby's here. Cause I don't think we're going to end up keeping much of her income after childcare.

What does she think about that?

She's back and forth. Uh, she loves her independence. Um, she's also excited to take care of the baby. And I think we're kind of talking about, you know, let's look at 3, 4 years of you staying home and then we can revisit that.

And are you telling me that you're currently self-employed with this business?

I am currently self-employed with this business. I can—

So what do you mean jump into it? It sounds like you already did.

That's what I'm confused about too. What's, what's that mean to you?

Um, so I can go back to my employer as a 1099 subcontractor and make my $70,000 per year.

So you're saying, do I do this? Is it a safe, a safety thing? Like, do I do the safe thing of making the $70,000 with the, with the employer, or do I keep doing my thing making $6,000 to $10,000 a month even though it's more risky? Do I have that right?

Right. That's kind of, that's kind of where I'm at right now.

What makes it more risky?

Just the fact that I may not be able to find work for myself and that—

Well, right now, based on what you said, if you make $6,000 in a month and it's just you, you can't cover your monthly expenses. So this house is too much of your income. Even at $10,000, it's still close to 40% of your take-home pay on your best month.

It's getting close.

And so I, I don't know that this house is a good long-term option for you.

Yeah.

If you guys want this life where she stays at home, I'm self-employed doing this business and covering, you know, all the insurance. So that's the tactical numbers you need to crunch and figure out if you can sustainably make $12,000 a month, $13,000 a month with this business, I would consider it, but I would probably go get that full-time job again and do this on the side until you have a clear path to doing it on your own full-time. Just a lot of risk here.

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Hi, good morning.

How are you?

Doing well.

So I was calling basically just to see. So right now I owe $52,000. Me and my husband owe $52,000 to my car that we got in August. We have about $40,000 in our bank account saved. We started saving pretty aggressively back in December. And we're about to have a baby in July. Um, my husband makes about $10,000 a month, and I'm a travel nurse, so sometimes I work, sometimes I don't. But my question is, should we get rid of my car payment or should we keep my car payment? Because my husband owes about $3,800 to his truck, which we were planning to pay off within the next 2 weeks, um, about $3,000 to a furniture payment, and about $13,000 to Land that we're paying on.

Land?

But we want to know if we should— yes, land property. We want to know if we should get rid of my car or if we should keep my car. I don't like my car. It was an impulsive buy. What kind of car is this? It's a 2025 Honda Pilot. I wouldn't say it was an impulsive buy. I actually wrecked and totaled out my Grand Jeep Cherokee that was paid off in July. And we were trying to hurry up and get out of the rental, and it ended up having a better interest rate than a used car.

Wow.

Um, interesting. Yeah.

So that's how they got you. They said, we'll give you a lower interest rate if you buy a brand new one, a $52,000 loan. He said, what a deal, I'll take it.

I mean, I can tell you—

actually, it was about $60,000, so we paid it down some, but it's still very expensive.

That hurts my soul. Okay, what's the car worth today?

Uh, so we quoted it with Carvana because we thought about selling it to them. It's about $43,000. That's how much they'll give us for it.

Okay.

But we still owe $52,000.

So, okay, so we're upside down there. Not too much to scare me. Uh, I think we can get out of that. And I would, by the way, uh, if you want to get out of that, you guys have the cash. You can pay the $9,000-$10,000 difference and even have a little bit left over to get yourself, like, buy yourself a cash car, maybe $10,000 or $12,000 since you're trying to get out of debt. I know you've got a baby on the way. Uh, so hold that, hold everything that I'm telling you to the side, uh, because I, I know you have a baby. Um, the way we would teach to get out of this debt is by snowballing it, listing it smallest to largest, uh, and paying minimum payments on everything in the meantime. So it sounds like the smallest thing here is, is the furniture. So I'd hypothetically knock that one out first, uh, with any extra money after paying the minimums. Then I'd move on to the truck, then I'd move on to the land and do it that way. However, there's a baby coming in July.

So we always talk about stork mode here on the Baby Steps, where you can hit pause to stack up cash. Now you guys already have the cash stacked up, so that changes the advice here. So now it's how much can we use to pay off the debt without putting us in jeopardy to make sure we're okay until baby and mom are home safe? And so Jade's right in that debt snowballing these, these bottom few, you could do that with less than $20 grand from your $40, which frees up those payments and gets rid of those debts. And then maybe pause until baby's here and then decide what to do with the car.

Right.

I think we were hesitant. I think we really wanted to kind of get rid of the car because the car payment is $955 a month.

Yikes.

You know, I know we can afford it. I'm just thinking—

The question is, what car are you going to get on the other side of that?

Well, we were planning for me to just drive my husband's truck because he drives, uh, he works pipeline and he is always in his work truck. He's never been in another state for 4 months.

So you can live on, uh, you can be a one-car family for a while?

Yeah, because he hasn't driven his truck in about 4 months. It's been in another state.

So I'll be honest with you, I would get out of that car right away because it knocks your debt In the debt snowball from $52,000 down to $9,000. So then that order would be the furniture, the truck, the loan, the upside down difference, although I guess you could do that in cash, and then the land.

Right.

And I would also shop around to see how much you could get for that car. You may wanna check CarMax, a few local dealerships, private party to see if you can be less underwater. So you're not eating as much of this. And then if you can live on that, be a one-car family for a while, you just freed up $1,000.

Absolutely.

These other debts will get paid off Real fast because you're not having to dip into savings to get something for you to drive right away.

Exactly.

Yeah, I like that plan. Now let's talk about the stork mode thing a little bit, because you do want to consider that. You need to make sure that you've got a nice chunk of money sitting there. And I'm not mad at— if you want to wait until the baby comes to do all of this because it makes you feel better, I'm not mad at that. A rule of thumb that I kind of have is I want to make sure that I have the out-of-pocket max saved. Like, that's what I want to make sure I have just in case you stay in the hospital a little longer, just in case there's any complication, God forbid, uh, that you have the money there because that's really the most that you're going to come out of pocket. And then you might want to do some calculations on, I don't know, George, meals. Like, that first couple weeks can be, can be tough. So just making sure that you've got a nice cushion of money there just in case, uh, is really, really important.

Yeah, no, nobody's cooking for at least a month, so you gotta factor that in. Hopefully there's a good meal train going.

Get on the old choo-choo.

Yeah, the math Sharon says that if you paid off all of your debt today, the underwater amount plus the other debts, that's $29,000 out of your $40,000. So you'd still be left with $11,000 plus another month or two to save out of your great income. So you guys might decide, hey, we can do this all right now and take the stress off.

That's right.

So that when this baby arrives into this world, we are debt-free. Wouldn't that feel good?

That would feel good.

So it's a risk tolerance thing, because either way, all the debt's getting paid off in the next You know, in 50 days. So the question is, when do you want to do it based on your comfort level and all of the variables that we haven't even talked about? So I would sit down with your husband tonight and figure that out and decide a plan that works for you guys. But my guess is you could probably stack up another 10 grand before the baby's here.

Right. Yeah.

Cause I'm actually traveling at the moment right now.

Oh, great. Good.

Wow.

So based on the next couple of paychecks, think, okay, what are these next paychecks going to be until You know, I head into the hospital, have this baby, and if you can make it work, I love the idea of you guys becoming completely debt-free and getting rid of this payment, because next month that $955 stays with you instead of going to Honda lending.

Ooh, that's a nice feeling. Whoo!

$1,000 car payment. That makes me want to throw up. Glad it's gonna be out of your life. All right, Jessica is in Detroit up next. What's going on, Jessica?

Hi, my husband and I are on Baby Step 2 and plan to be moving into Baby Step 4 around this time next year. I own my own company and have learned that my business can contribute up to 25% untaxed of my salary into a solo 401.

Yeah.

But yeah, I'd like to know where this fits into the Baby Steps and how do I know if I should prioritize that contribution over taking owner's draws to pay down the mortgage on our home?

I love this question.

Okay, good. I'm unclear on the best way to categorize these revenues. I have to make the choice between funneling it through payroll, taking it as owner's draws, or making it employer contributions into my personal retirement.

Yeah, I, I think right now, because you have the debt, you're doing owner's draws and you're, and you're doing payroll, right? That's what my husband and I did. There's probably a limit on how many draws you can take, and then the rest is payroll, and you can get with your tax person or your bookkeeper on that. And You're— yeah, it sucks because if you're taking more payroll than you want, right, just to, to be able to pay off personal debt. Um, so I would do that. And then the 25%, which is fabulous for that solo 401, that falls under Baby Step 4. That's you investing. And so that's where that falls under. Now, I wouldn't go over, uh, 15% until you've gotten through the baby steps. And then, yeah, if you wanted to go up to that full 25%, uh, limit, you could. But it, it all fits within the, the parameters of the Baby Steps for a reason, and, uh, it's because we want you to be paying off your house. So once you've gotten up to 15%, you can do the rest through payroll. There's a— I'm— I don't know if you work from your home or not, but there's a certain amount that you can pull from the business to put towards your mortgage as well.

So yeah, get with a tax professional, get with your CPA, and definitely do that.

Yeah, so the key is It sounds great to invest right now, but we have some debt to clean up. So let's wait one year from now. You got your eye on the prize. You're gonna be investing 15% there. Let's knock out the mortgage. And in no time you'll be investing that full 25% and you guys will be building some serious wealth for the rest of your life.

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10% off up to a $250 value. See store for details. Welcome back to The Ramsey Show in the Fairwinds Credit Union studio. I'm George Campbell here with Jade Warshaw. Open phones at 888- 825-5225 if you want to jump into the conversation about your life and your money. Jacob is in Springfield, Illinois up next. Hey, Jacob.

Hey, how's it going?

Great. How can we help today?

Yeah, so my wife and I, we're, uh, uh, basically just trying to figure out how to navigate, uh, rising costs and everything, uh, while still trying to, uh, put money aside for the future and for retirement, but also just other savings goals and just trying to figure out how can we navigate this while everything seems to be just keep rising out of control.

Where do you feel like in your home, where do you feel like you guys are feeling it the most? Is it groceries? Is it gas? Are you trying to buy a house? Tell us the top 3 pain points that you feel like you're feeling it.

So our 2 biggest expenses obviously are going to be housing and childcare. But then the third is actually kind of a tie between groceries and gas.

Okay.

Good to know.

Okay.

So let's get into the nitty-gritties. What do you guys do for a living and what do you earn?

So I'm in insurance service. And then my wife, she's working in a clinic. So we're basically combined, we're right about $110,000 a year gross.

Okay, cool. And do you have any debt right now?

The only debt we have is our mortgage. And we have a small, about $200 left to pay off on our credit card.

Okay.

And that was just due to a monthly, not a monthly, a couple of medical bills that we just wanted to split those payments, not to ruin our budget.

How much do you have in savings right now for your emergency fund and anything else?

So emergency fund, we have about 3 to 4 months of expenses. We're right about that $20,000 range.

Okay.

Okay. So I think in those ways, I feel like you guys are in a pretty good spot. I guess the biggest question is, how much is your mortgage payment every month?

Uh, it's about $1,325. Um, so I mean, it's probably about that 21%, I think.

Yeah, excellent. Right. So it's got to be childcare then. How many kids do you guys have and what are you paying for childcare every month?

Uh, so we just have one child. She's 18 months and we're paying, uh, right about That would be $1,300 a month.

I mean, that is definitely it. I mean, you're usually somewhere between $1,300 and $1,500, especially for a younger baby.

Are you guys investing 15% right now?

We are not. So I'm putting money into a Roth IRA and then wife is putting about, I think it's about 5% of her paycheck into a 403.

So I see—

oh, how much into the 403?

Uh, I think about 5% of her paycheck.

Well, I can tell you, I mean, I'm looking at the biggest ticket items— your mortgage, daycare— that's eating up $2,600 of— I'm guessing you're bringing home around $7,100 a month. How much are you bringing home?

So after taxes and after deductions, like, uh, Uh, insurance and healthcare, all that stuff. Uh, we're right about $6,400 a month.

Okay.

So I still think there's something missing here. Have you guys done a detailed budget to figure out where the rest of the money's going? Because even if you were spending a bunch on groceries and gas, there's still a couple grand left over.

Uh, so yeah, actually, I mean, yeah, I was just doing the budget before we hopped on and I mean, Looking through our paychecks, it costs, I think it was about, I want to say about $150, $180 per pay period for healthcare because mine's by myself and then wife covers herself and our daughter.

So yours doesn't cover—

It's cheaper that way.

Okay, so hers is coming out of the pay. So that's the $6,400 a month that already covered hers, and then yours is another $300 a month. Is that what you're telling me?

So no, for my healthcare, it's like, I want to say about $150 a month.

Oh, okay. So that's, that's not the problem either. Here's what I— this is what I think. I think you guys don't have a detailed budget. And I think— and this is no implication, this is no judgment— I think you guys have a young baby. I think you've come off You know, when you have your first child, it's a major life change. You're doing a lot of things out of convenience. You're doing a lot of things out of learning what a new life rhythm feels like. And my guess is there's just a lot of spending that can be cleaned up. And I'm not saying that some of it hasn't been necessary. You have a new baby, so you buy new gadgets and new things and conveniences to make life easier. You pick up dinner more often. Those sorts of things. And my guess is that if we give you every dollar and you really use your bank statements to kind of do a— what I would recommend is do last month's budget, go look at your bank statement and plug it all in. And you're going to go, oh crap, you're going to see how much in the red you were.

And then do this month's budget and in real time start making those adjustments. And I think, George, that they're going to find a couple of thousand dollars there.

Yeah, you'll see. Based on my estimations, there should be like $2,000 left over. And so the last question is, What are you actually saving for? Because you're saying you're having a hard time continuing to save. Is that for the emergency fund? Is that investing? Is that trying to pay off the mortgage? What is the goal?

So we actually do use EveryDollar. You're talking to the nerd. Oh, okay.

Yeah.

Well, what do you think is going on there?

If you see the line item, tell us. How much is actually left over when you do your EveryDollar budget? What's the margin right now?

So right now it's about, uh, I mean, granted, last month was rough just because we had 5 weeks to pay for in daycare.

Um, yeah, but that'll get you—

it's right about, it's right about $800 a month. Uh, so our savings goals that we have, we have to just cut— we have a kind of a, uh, a home improvements, uh, savings account. We have emergency fund. I'm just Basically just trying to keep up with it a couple, like $100 or so here or there. Um, the, but the other 2 big things that we're trying to focus on is the, uh, saving for a new car to try to pay that in cash.

And you have sinking funds for all those things? There's a sinking fund for savings, sinking.

Okay.

So that's where the money's going, which in that case, I'm not mad at that.

So that's why there's $800 left over after all of that.

Right.

So we have that. So we, we, uh, so we contribute to those sinking funds at the end of the month when we, after we see where our margin's at. Um, so for new, so for the car, uh, a vacation fund that we just have kind of just to keep as like a safety net for if we want to do a vacation in the next year or so.

I think that's great, Jacob. I think what you're doing is exactly right. Uh, the only thing that I would tweak in what you said is I wouldn't wait till the end of the month to decide that. I would plan that when the month begins because the money you have is the money you have. You're both, it sounds like, on salary. So if you know we are taking home $6,400, make the plan on purpose. This is how much we're spending. This is how much we're putting in the vacation sinking fund. This is how much we're putting in the car. Do it at the beginning because if you don't, you'll let yourself go over on DoorDash. You'll let yourself go over on, you know, some of the frivolous things and then just say, well, That's okay, we're just not gonna put as much in the car fund. Be intentional about that. It's your money, you get to decide. And if you want it to feel like you have more going to those categories, make the necessary adjustments.

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Sarah is in Sarasota up next. What's going on, Sarah?

Hi, thank you so much for taking my call.

Sure.

So I had a question. Um, so we bought our home in 2022. We bought it for $535,000, and, um, there's a lot of equity in that— in it now. We think it's worth about $750,000, and I should be coming into a settlement in the next 6 months. I just talked to my attorney today, and I think I'm going to be receiving about $250,000. And my husband really wants to sell our home, take the equity and the money from the settlement, and buy a home outright so we don't have a mortgage and we just have a little bit more freedom in our budget. But to be honest, it doesn't really buy a lot of house around here anymore. And I like our neighborhood, and, you know, we are kind of tight month to month. And I was thinking maybe we take the We have kind of a smaller emergency fund, so I was thinking that we put $50,000 in an emergency fund and $200,000 down on our mortgage, which we have $397,000 left on it. So I was thinking about doing that, but I wanted to get from you guys what you thought was a better idea.

Cool.

So you guys, do you have any debt right now outside of that mortgage?

No.

Okay.

So you're thinking, hey, let's stay in the house. Let's use $200,000 to throw with the $397,000. That brings it down to about $200,000 in a mortgage. And then would you do a recast to get the payment lower?

Um, that was going to be my other question. Do we do that, or we just kind of continue to white-knuckle it and try to pay it down faster, or we do a recast?

Well, what's your current mortgage payment right now?

It's $3,600 including the HOA and the CDC and, um, insurance, taxes, and everything. I think the actual, like, mortgage is only like $2,500, but, um, I mean, we live in a place You know, an HOA community. And there's also questions that probably is going to go up over time. So is the community development fee. And, um, I think our taxes should remain stable because we're homesteaded.

But yeah, what's your take-home pay every month?

Um, I think it's around $9,300 a month.

Okay.

But that's kind of variable. Um, we made $206,000 last year, but my husband got a bonus and I got a bunch of commission, but we can, we're guaranteed $9,300 a month, but I made about an extra $30,000 last year in commissions and bonuses.

I was gonna say, making over $200,000, you should be bringing more home. So I would look into that because I'm going, man, $3,600 all in for your house, your housing payments, for all the HOAs and things. That's, that's a lot of your take-home pay right now. So you are feeling the pinch. Um, but with the recast, it could lower it, which would help. Um, but again, if you can just keep paying what you're paying and not pay for the recast, you'd be fine to just keep knocking through that mortgage And if you guys did that, you'd probably be done with this thing in what, maybe 2 or 3 years?

The mortgage?

Yeah, could you do that?

I think that would be a little bit hard for us. So we have one child still in daycare.

Ah, that's a mortgage payment right there, for sure.

Yeah, it is. And I also— we have quite a bit of medical expenses. So I just went through kind of a really hard, challenging time health-wise. And, um, the treatment that I'm doing right now is not covered by insurance, and I'm spending about $700 a month on that.

That could be another reason why the recast is good for you, because obviously, for anybody listening, when you do a recast, you're throwing the lump sum at the mortgage, and it's just recast at that new principled amount. It doesn't change the terms, it doesn't change the length of the loan, but your payment is going to be lower.

Everything stays the same, but the payment's now calculated on the new balance.

The new balance. And yeah, so your, your payment would be lower, and that would free up a lot of and especially if you're saying you've got medical things to pay for, there could be something there. But I do, I would caution on this because it doesn't change the length of the loan. You do want to find ways to be more intentional about paying it off since it is a lower monthly balance, monthly payment, I should say.

Yeah.

So that's where I'm going, man. If you guys make $200,000 and you can live off of, let's say, $80,000 to $100,000 and throw the rest of the mortgage, that's where I'm going, hey, you could pay this off in 3 years. But if you're saying there's a lot of other expenses right now, That's okay. You guys are in a tough season. I mean, you got one in childcare, you're dealing with the health issues. I would focus on that right now. There's no urgency to knock out this mortgage as far as, you know, nothing's on fire here. You guys are doing great. So I would take care of you right now. And when the time is right, you do this move and bringing that mortgage payment down will give you some breathing room for sure.

But I wouldn't downsize into a house that you guys hate just No, I wouldn't do that either because you're not going to enjoy it. You want to live like no one else.

He thinks we can find a place that we can be happy in. Like, we don't have a pool. We could afford a pool in some of these different areas, a little bit more land. We'd be closer to schools. Also, the schools that we're zoned for are really far away from middle school and high school. So I think he's thinking long-term. And I get, I get all the reasons why, but I mean, we've been in this neighborhood for 4 years now and I really, we have a big, beautiful home that we have a lot of equity in and we were very lucky. I mean, I think to get in when we, into this neighborhood when we did, I mean, a new house here, construction with everything we have would probably be close to $1 million.

Yeah.

So I feel like it was a really good investment and I want to stay here, but things are really tight. So the other day it just came up. He wanted to do some more sports activities for my son over the summer and it it was going to be $400. Like, we had just paid, like, for a camp. We found, like, a county camp that was very reasonable in price. We had just paid for that and a bunch of other expenses. And he's like, I hate that things are so tight all the time.

It's a values question.

Yeah, you guys have a mind on that of what's important to us and what are we actually going to put in the budget. And that should be a reflection of, of the life you guys want.

And because you are talking about a mortgage You do need to look long-term because you don't want to make a short-term decision and change a long-term asset like a mortgage. So you need to be thinking through, okay, the sports thing, is that just for this summer? How many summers do we see them wanting to participate in things like that? And really think through how long certain variables are actually going to be part of the equation and just have some really intentional time set aside to dig through this before you make a major choice, I would say.

Thanks for the call.

Yeah.

Appreciate that, Sarah. Good luck with this and the health issues especially.

Yeah.

Kyle's up next in Louisville, Kentucky. What's going on, Kyle?

Hey there, thanks for taking my call. I am 45, my wife 43. We have 3 kids, a daughter that's 15, a 14-year-old boy that has profound autism, and we have a 10-year-old boy. My question is whether I should keep A survivorship policy that I have in place that the sole beneficiary is a special needs trust that we set up for our son, who's likely to be with my wife and I for his lifetime.

Hmm.

So, I know that Dave is not a big fan of a lot of these universal life policies, but wanted to get your all's thoughts on how I should think about that from a special needs How much is that?

What's the premium on that?

The premium is only about $1,300 a year. Definitely not anything that's breaking the bank. It's something that we plan for every year. The death benefit would be $500,000 in the event that both me and my wife died.

And that would go straight to the special needs trust?

That's correct. And in addition to that, you know, I have a term life policy that is about 10 times my base salary. My wife is a stay-at-home mom, and we also have a term life policy on her as well.

Okay, okay, that's good.

Is there anything else in the special needs trust besides those 3 pieces?

No, uh, not, not currently. And the term life policies don't pay to to the trust immediately. Um, you know, that would go to my wife, or if she were to pass away, that would go to me and then would likely go to our other kids. The trust is there to fund, uh, you know, any trustee or any caregiver that, that might, uh, take on, um, you know, our son.

Yeah, I mean, if you guys are debt-free, you're investing well, $1,300 a year is a small price to pay for some peace of mind right now. And if you want a second opinion, I would definitely get with an estate planning attorney, a SmartVestor Pro at ramseysolutions.com, because special needs trusts and having a special needs child, you wanna make sure that all the I's are dotted and the T's are crossed to take care of them if something were to happen to you guys. So you're doing a great job, man. I can't imagine, uh, what you guys are dealing with. 3, 3 kids and the special needs kid. That's, uh, that's a lot to manage at your age in your mid-40s, trying to hold down the fort.

Keep it up.

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Alrighty, today's question comes from Hudson in Utah. He says, I'm 17 years old and I run a music marketing business using Spotify playlists. I've been running this business for just about a year and a half now. The business has taken off and I have secured several deals worth up to $25,000 and have gotten to work with very large artists. My parents are hard set on me going to college, but they are not paying for it. So all tuition and expenses would be on me. I have about $30,000 in the bank, a car worth $15,000, which I bought with cash and zero debt. Do I go to college and pursue a business or finance degree, take a gap year to try to scale my business, or skip college completely? Man, I just love this question.

Wow.

because it really does. I like things, George, that kind of like butt up against norms and like allow you to do your own thing because there is no rule that says when you leave high school, you must go to college. There is no rule that says that. And I know a lot of parents probably hate me saying that, especially if their children are listening. But it's true. That's not always the smartest path. And so if we have 3 choose your own adventures here, Go immediately to college, which is very easy, George, for somebody to say, go spend your money on this. They're not the ones paying for it. He doesn't, I mean, he's got $30,000, but he maybe doesn't wanna spend his money that way. He's doing something entrepreneurial that's doing well for himself right now. I like that. And so my thought here, I'm just gonna, and I wanna hear your opinion too, George.

Ruffle some feathers. I know what's coming.

My opinion, my opinion is college is always gonna be there. It's always going to be there. And I know there is something to like momentum. Like when you're, you don't want to just take a gap year and not know anything, right? But this guy, he's got a clear path. It's like, okay, there's momentum going in one direction. Follow the momentum. Your entrepreneurial business on Spotify is taking off. I love you doing it. If for some reason it putters out and you find yourself like, okay, the reason it's puttering out is because I just don't have the information or skills I need to grow it. Well, then you might look at, okay, what are some of the things I need to learn? Is it a university path? Is it a certification path? Do I need to go shadow and, you know, do some sort of internship path? So many options there. George, what say you?

Well, as a guy who took a gap year, I went to school for a year, took a gap year, pursued music, was in a band, worked at the Apple Store. Everything you think about me looking at me is true. So I would never tell them not to do that. I mean, I mean, here's the funny thing. People send their kids to colleges with prestigious music programs hoping one day they'll start a business like Hudson did at 17.

Yes.

And just not to be whatever, but the school is already behind. The education is already behind what people are doing right now.

Your professor doesn't know what Spotify is most likely. So I would go, hey, I'm gonna pursue this. I'm gonna see where it leads. And worst case, if you go, man, I am at a wall, I hit a wall, I don't know where to go from here. I think a business degree would help, or a finance degree would help, then go for it. But do it because you're passionate about it and not because mom and dad told you to.

I don't think that college is a place to search for what you want to do. I don't, I don't think you should search for $80,000.

For most parents, it's just a safe place to find that. And so they go, well, I'd rather my kid there than out in the real world.

But you're paying for every semester and every change of major and every change of I just think that we can be more efficient.

100%. I always joke that you should— if you want your kid to be cultured, send them to Europe for a year instead of to college. I can tell you it'll be cheaper and they'll have a better time and come back a different person.

I agree with that wholeheartedly, George. As a person who worked on ships right out of college, traveling the world will do more for you than a lot, a lot of things. I'll tell you that.

All right, way to go, Hudson. Yeah, I'm proud of you, man. I mean, I don't want your parents mad at me, They're already mad at you, but I'd say, Mom and Dad, unless you're footing the bill, I'm gonna just pursue this business.

And let's add this, maybe he has to move out at 18 because of it, because Mom and Dad have one opinion and he has another. That's okay too.

And you can afford it if this business keeps up. Way to go. Jason is in Chicago up next. What's going on, Jason?

Hey, how you doing?

Great. What's your question today?

Uh, so I have a 2026 Honda, and it's $25,000 left on the vehicle.

I have $23,000.

I'm close to paying it off already, but I was wondering, I don't know, I get paranoid when I don't want to pay it off right away because then I have nothing in my bank. Would you recommend just paying off right away?

Or, I mean, I could build it back up pretty quickly, but like— What's your payment? So, uh, it's $532. And what's your next paycheck?

What's my next paycheck?

Yeah.

21, 22.

Okay, so we're talking 2 paychecks from now, you'd have enough to pay off the car and still have $1,000 left over in savings?

Yeah.

And you'll be freed up of that $532 for the rest of your life.

So how quickly could you save it back with $532 extra in your pocket every month?

I could probably give it like a couple months.

I'd be in a decent spot.

I think you have your answer.

Because what I do is I split my check in half.

Half of it goes to savings, half of it goes to bills, and go from there. Okay. So 50% of your take-home pay is going to that savings account that has $23,000 in it?

Yep.

Way to go! I mean, if you keep that up once you're debt-free, you're going to be Right as rain, my friend. So I would definitely do that. I mean, if you look at our Baby Steps, Baby Step 1 is a $1,000 starter emergency fund, which means if you have more than that, it's gonna go towards Baby Step 2, which is pay off all of your consumer debt. So is this all the debt to your name? Is this $25,000 car loan?

Yep.

Man, I would pay it off and not look back. But again, don't do it until you have that $1,000 buffer on top of the money to pay it off. So we're talking about a month from now?

Roughly.

That's it.

All right.

I would not be scared, my friend. And listen, if you have an emergency come up, you hit pause and you cover the emergency, and then you hit play and move forward again. But are you a single guy?

Young guy? I'm not single, but yeah, I'm young.

Is, is your wife working outside the home?

Uh, yes.

Okay, so we have 2 incomes on top of this.

Yes.

What are you guys bringing home every year or every month?

Uh, probably she's bringing— oh, a month?

I don't—

I mean, she's my girlfriend, so.

Oh, okay.

Oh, well, that's a different story.

Okay.

Different story.

Yeah.

Then it doesn't— then the, the advice stands.

It does not concern her. Not her business. Just kidding. Appreciate that, Jason. That's a fun one.

That is.

I want to talk about the, uh, the car loan epidemic, Jade, because I just saw the headlines that they have now surpassed student loans in national debt.

Oh boy. What's the number?

I believe it's $1.68 trillion. Oh wow.

That is surpassing.

In auto loan debt. The average payment is now $750 for a new car.

That's painful.

And in the high $500s for a used car.

Yes.

And it just shocks me that people are still out here buying a brand new car, which depreciates 10%. The moment you drive it off the lot, 60% within the first 5 years on average, while you pay interest and it goes down in value.

I think the most compelling argument here is when you synthesize the data out there on car payments, who has car payments, you can derive that of working adults, adults that are of working age, over 50% of them have car payments. Then when you you stack that up against to the percentage of people who are living paycheck to paycheck, and then when you stack that up against the amount of people who feel like, I won't be prepared for retirement, or I don't have enough money in retirement, the numbers are so close that you go, oh, it really is true that the car payment is keeping middle class broke and unable to cross over that line to wealth. Well, that's very interesting.

And then the hardest part is we can justify it. I mean, every— you talk to the callers, they got brand new cars. And I go, why'd you need a brand new car? Well, safety and reliability. I go, okay, so 2 years from now you've got a used car. Is it still safe and reliable?

Yeah.

Yeah, it is. And the, the truth is new cars, you know, if you look at all the technology and things that can go wrong, they're not as reliable. Some of these used cars without all the bells and whistles are actually safer in a lot of ways and less, less prone to needing all these repairs. So what I do is research the make, model, year for known issues that come up with this car. Don't buy one. Oh, it's got the CV transmission issue in that Nissan.

Great.

Let's avoid that specific model for those years and find something we can buy in cash until we can upgrade in cash. And if you stair-step it that way, you are guaranteed to build wealth.

Agree.

Instead of trading in one payment for another.

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All right, Jade, you've heard the saying, check yourself before you wreck yourself.

Yes.

I apply that to insurance.

Okay.

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Because when you diss Dre, you diss yourself.

Thank you. Full circle. Marie's in San Jose up next. What's going on, Marie?

Hi.

So 3 years ago, I went to the emergency room because of a cold, and I'm not from this country. I had no idea how high deductibles worked. I had insurance at the time, and while I was there, I signed up a paper that the amount would be around $720, but I was hit with a bill of $4,700, and the insurance paid $1,700, and I still have a $3,000 bill to pay. I think that's outrageous, and I really don't want to pay this bill. I didn't pay, so it went to collections, and the collections company sent me a bill with the same amount but with my, my name wrong in it. I was wondering if I can skip this payment.

Okay, so you've— when you went to the hospital, did you stay over, or was it just a quick ER visit? Tell us. And did you think that you were just going into an urgent care Tell us what happened. Did you stay over?

No, I didn't. It was a few hours. There was a lot of people. There were a lot of people in there.

Um, was it the emergency room?

I took a, a pill and like a, like an Advil. Like, they gave me an Advil and that was the whole treatment. Uh, you know, it's like, it was a short time. I mean, it could be faster, but, you know, for what it was, it took a long time, but it was A cold. I had a cold.

Did you get an itemized statement? Did you get them to print you out a statement of each line-by-line item?

So I called them and I complained about the price because I couldn't believe when I saw the price, um, and I asked for an itemized. They didn't send me the itemized. They, they never sent me the itemized.

Hmm.

I, I would, if I'm in your shoes, send a written dispute to the collection agency and to the original hospital I can tell you this, I don't think you're going to get out of it because of a typo of your name. No, that's not going to do it. The debt is yours. You can get a debt validation letter, you know, you can send them that, but they're going to validate it and go, there's a typo in your name, but the debt is yours.

I'm surprised for— if you saw the portion that the insurance paid but you couldn't see the information, do you see what I'm saying? I would keep fighting for that. I'm like, let me know.

Show me. Let me see.

3 years.

Oh wow.

Yikes.

Well, you can still try to get all that information, and at this point they're gonna be willing to settle. Do you have any money?

I do, I do, yeah.

Okay, so this is more out of principle. You're just angry at the American healthcare system.

Absolutely.

Join the club.

You could probably settle this for a quarter of the amount and be done with it.

Do you think a quarter of the original amount that they asked, that I signed for? Because they told me I was going to be billed $700 and they charge me $3,700.

I mean, you can talk to the collection company and say, listen, I was told it'd be $700. I've got that. That's all I have. If you'll take that as paid in full in writing and don't give them access to your checking account, then you call it good and see what they say. They might go, no, we can't do $700, we can do $1,000. It's probably worth it for you to not deal with the hassle at this point and just go, all right, I'm angry, but you've been angry for 3 years now.

Yeah.

So I want you to just be free of this.

And when you settle it, just know, um, because I've had to do this, you might have to call several times to get somebody with a brain who will actually know the policy that they can settle it. The first 3 people might say, we can't settle this, you owe $3,000. Just hang up and call the next person until you get somebody with some persistence, brain cells.

And have you talked to the insurance company to understand why they didn't cover more, or What your actual insurance was?

I didn't call the insurance company. What I understood is that I had a high deductible and I, at this point, I had no idea. Uh, at that point I had no idea how this worked in the United States. I had no idea of this scam that insurances are in this country. Um, so I, yeah, I didn't, I sincerely didn't understand. I couldn't believe, I thought I was going to, I had to pay the whole thing, but the, what pisses me off is the $700 jumps to $4,700.

Yeah, that is the confusing part. That's the part I would at least get the info on, and through the itemized bill and some of the validation of this debt. And I would be talking to everybody. I'd be going to the insurance company, to the hospital, to the collection agency, and really get to the bottom of this before you ask for that settlement.

Just so, so you know, the typo in my name is not really just a typo. It's like a whole name. They put a wrong name, like they put the first name correctly and they put They put a second name and then they put my last name.

So do you think there's a confusion of accounts? Do you genuinely think they have your account confused with someone else?

You know, it is possible. I never thought about it, but now that you're saying that, I mean, it could be.

That's where sending that debt validation letter would really help. Say, hey, this isn't even my debt. This isn't my name.

I don't know.

I didn't get these services. And so that's the part you can fight. And I would, but again, it's been 3 years. And so there, you might be limited in your options because of the age of this. So worst case, if you fought the good fight, I would just try to settle if it really is your debt. And if not, keep fighting, Marie.

Good luck.

Yeah. See if it's connected to your Social Security number. That's usually a good place to start.

Yeah.

That's a good call. And pull your credit report and see what pulls up on there. Because if it's not on your credit report, you got to wonder.

You got to wonder.

Is it really your debt?

Listen, 2 Marias could have come in on the same night. With similar last names and similar symptoms.

Well, what's funny is we just took a call from Maria and now we've got Maria. Maria, was it your debt? Hey, are you with us?

I think you're calling on me.

I am.

Can you hear me?

Yes, how are you doing?

Hi, I'm well, thank you. How are you?

Good. What's your question today?

Good. Um, so I have a Settle the Debate question. My husband and I are on Baby Step 2 and we are debating whether or not to pay off off, um, kind of like our 5th or 6th, uh, loan amount debt, um, to free up a huge monthly payment.

Oh, tell us more. How much would you be paying off if you jumped the line and paid off the 5th smallest debt? What's the amount of the debt and what's the monthly amount?

It's $3,591.07 and the monthly payment is $471.05.

Okay, and what's the smallest debt right now? How much is it total and what's the monthly payment?

Uh, it is $2,000 total and there's no monthly payment because it was a friend from church that, um, lent money to help pay for a car repair.

Ooh, listen, I'd want that paid first.

Yes, like, uh, aside from the rules for a second, I would 100% pay the friend. That's a relationship tied to that.

Right.

How much money do you guys have right now to pay if you threw money at debt?

Um, right this minute, we like— it's, it's about $4,000 to $6,000. I was pregnant, so we were like bankrolling, and then several things went wrong. We all 3 ended up in the hospital. So we have money to throw at debt, but we're waiting and we're just kind of like holding My husband just started working again and, um, we're still waiting for the financial assistance application to be answered to find out like how much of it is, are they going to like charitable write it off or like what they're going to do?

Okay.

Okay.

So let's imagine perfect world.

We'll call it good for a grand. We want to make sure we have it.

Yeah.

So let's say you have $5,000 to throw at your debts. If you did the debt snowball, how many debts would that knock out?

So that would be 1, 2, it would get into 3.

Which is the $2,000?

Yeah, so it'd be 1 for $2,000, 1 for $2,014, which is a credit card, and then 1 for $2,800, which is a past-due bill and also doesn't have a monthly minimum.

Okay. I still like the debt snowball option because you're gonna be up against that one soon enough, the 35/91. If it was like $1,200 or something, it might be worth it if you have the lump sum. But I think either way, if you map this out on paper, you're probably going to get to the same destination in a similar amount of time.

Yeah, and, and because this particular loan goes down by $471.05 per month, so we've been having this conversation for Many, many, many months. Yeah. And at this point it's gone from like $10,000 or $8,000 to like $3,500.

I mean, I can tell you this, I can tell you this, Maria. I would— I, I do care about relationships when you owe people money, and I do care about knocking those out fast. I think there's worse things you could do than to pay the $3,500 first, but I'm a person who I like following the rules.

I think when you set a standard to follow up properly, Welcome back to The Ramsey Show in the Fairwinds Credit Union studio. I'm George Campbell, joined by Jade Warshaw this hour, taking your calls at 888-825-5225. Julie is in Indianapolis up next.

Hi, George.

Julie, welcome to The Ramsey Show.

Hey, thank you for having me.

Absolutely. How can we help today?

I'm wondering if I should pursue public service loan forgiveness or if I should try to pay off my student loans.

Hmm.

What are you doing for work?

I work at a university.

Doing what kind of role?

I'm a pharmacist.

Okay.

And what are you making?

$115,000 a year, starting when my job starts next month.

Okay.

And how much student loan debt do you have?

$164,000.

Okay. So the term on that is this idea that if I follow the payment structure that they put in place, Sometimes there's other things attached to it. Then after a while, these loans can be forgiven. The only problem that I have with this, like, I would love for everybody to have some form of, you know, payout on something. Oh, you didn't have to pay the debt. That's great. But the problem with this is the success rate is so very low. I mean, we're talking 1% to 5% of people even have their loans forgiven. That is just terrible. I mean, that is just a terrible success rate. So what a horrible idea to pour a decade of time into something and never see it, you know, it never come to fruition. When if you applied the full force of your income, that's only going to go up from $115,000 to paying off $164,000 as a single person with no kids. Do you see what I'm saying? I think that you could pay this off in more than half the time, don't you, of waiting around for the forgiveness?

Yeah.

See, I'm not— do you know why the success rate is so low?

Um, there's a lot of reasons. So a lot of it is paperwork being filed incompletely.

Um, incompetent government is the headline.

Yes, incompetent government. Whoever's working and checking things behind the scenes, there's just so much of it that you might not even be able to control here. And so that's—

We're talking like 3 presidents from now. And I don't know if you've seen, even with this administration, they're already starting to change the rules of what qualifies, what employers can and can't qualify. And so because of that, it just scares me for you to sign up for a 10-year clock, make all of these payments, minimum payments, while interest accrues, and then still possibly be on the hook while locking yourself into a certain job or a certain type of employer When you could go make more in the private sector? I mean, what if you went to go work for a big private sector company making double?

Yeah, that would be really difficult given my job. I pretty much have to work at a university, but I hear what you're saying. So right now I make $50,000 a year, like I said. Next month I'm transitioning jobs. I'll be making $115,000 a year.

How do I then allocate?

Like, what should my percentages be for my income? What should I be saving? What should I be putting towards this loan?

Well, let me clarify something first. Are you working for the university because they're a qualified employer for the Public Service Loan Forgiveness?

No, I work in academia. I do research and stuff. So I pretty much will always have to work for a university.

Because you're on the research side of things.

Just double-checking that. Okay. So So your question was, how much will you have to put towards this to pay it off?

Yeah.

Okay.

Well, let's look at, let's look at some real numbers to get this a fair timeline for you. So where are you living right now? Like, what are you, what are you bringing home and what are you paying for rent?

I pay $1,800 in rent and then that'll be against the $115,000 income.

Okay. And you haven't received the income, right? That's not till next month?

Correct. Next month is when I start that income.

Okay. So let's pretend you'll be bringing it in around $7,200 a month. I think that's a fair place to start, taxes considered. Okay. So $1,800 in rent. What other expenses have you taken into account that maybe we should think about?

Um, I mean, I have pets, so obviously like, uh, food and stuff, groceries, but I don't have any, um, car payment.

I don't have— No other debts?

Uh, yeah, no other credit cards, nothing like that.

Good. I mean, the napkin math is telling me you could probably knock this out in 4.5 to 5 years.

Yeah.

If you're bringing home $7,000 and you can throw $3,000 at the debt every month, which I think you can, and live on $4,000, that's very reasonable. And so the key is this is all we're doing is we're focused on this debt and we're not, you know, investing, going on vacation, upgrading the cars. This debt is gonna be your singular focus for a couple of years, but this short sacrificial time is going to free you up for the rest of your life. So how old are you today?

26.

Love it. Can you imagine by 30 years old, you're completely debt-free making Mid-six figures, if not more.

That would be amazing.

That's the dream for most people. And so what I don't want is for you to now be 36 and go, oh my gosh, this whole thing fell apart and now I'm still on the hook. Now you're really frustrated. Starting from scratch. So much regret. I like to feel like I'm in control of my life and I'm not mad at people who got the public student loan forgiveness. But the thing is, it was also created for the person making $38,000 who is going to have a real hard time climbing out of it. And so in your situation with as much as you make, It's a very solvable problem for you to just knock this debt out, making $115,000 plus.

Okay. Thank you very much. I appreciate the encouragement. I feel, feel better about this.

Good.

Yeah.

And if you look at that timeline and you don't like it, you still feel like it's too long, that's another place where you can take matters into your own hands and say, okay, maybe I'm working overtime. Maybe I'm picking up side hustles. Maybe I'm getting a roommate. All of these things that are going to add to your income and add to the amount that you can throw at this debt every single month. the more the merrier.

I like this plan. All right, Laura's in New Orleans up next. What's going on, Laura?

Hi, how are y'all today?

Doing great. What's your question?

Great. My question is this: I am, um, just about 62 years old. I just, due to my past not making the best financial decisions and being married at the time and no longer married, I have, um, about $190,000 in debt. that I accrued and took over from my divorce. And in retirement only have $329,000.

Okay.

What kind of debt's the $190,000?

I am, um, some, I had an SBA loan, um, where I used that. Most of that was to pay off debt that we had had from a marriage, um, due to some real estate Difficulties. And so I was able to get a loan to pay off some of that debt, most of all that debt, and at a lower interest rate. So the other debt is my car. I have a $550 a month car note for a car. I owe about $28,000 on that.

Hey, Laura, hang on the line. I'm going to carry you over into this next segment. 'Cause I wanna break this down with you and, and give you some hope that you can still retire with dignity, even at 62 with a bunch of debt, not enough in retirement. Let's walk you through a plan where you leave feeling confident. So hang on the line. We'll be right back to explore that situation.

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Ramsey Solutions is a paid, non-client promoter of participating pros. Learn more at ramseysolutions.com/smartvester. All right, we're gonna be joined by Laura. Before the break, we were talking to her. She's 62, has $190,000 in debt. She's got $329,000 in retirement. Let's see if we can help her out. Laura, are you still with us?

Yes, I am.

Okay, so you were breaking down your debts for us. You got a car loan, that's $550 a month. You have this SBA loan. Any other debts in that $190,000?

Uh, I have a, um, a boat loan that is about $40,000. Yes, I own with a person, so it's, it's a, it's my boat and another, uh, friend of mine that I, we are trying to set Okay, both of your name on it, on the, on the loan? It's under my— no, it's under my name.

Okay, just your name. That's good. Do you have any money saved besides retirement?

No, not, not really. Not anything to speak of.

Tell us the amount because it's something.

Um, it's probably $5,000.

Okay, great. $5,000 saved. And what do you bring in every month for work, from work?

Um, I make about $30,000. $2,000 a month gross.

Okay, good. Wow, that's great. That helps the situation out.

That helps the situation greatly.

Now, how much do you actually have left over? If you, if you went real serious and went, I'm gonna cut all my expenses, I'm selling the car, selling the boat, how much could you realistically throw at this debt out of that $32,000? Obviously that's gross. So are you bringing home, you know, $22,000 and then you've got a bunch of debt payments?

Right.

Yeah.

So, um, I could probably—

that's probably about, I'd say, with all my expenses, about $10,000. That's with expenses.

Okay, so you got about $12,000 left over.

Yes.

That you could throw at these debts.

That's great.

And what's the car worth if you sold it, and what's the loan on it?

I owe about $28,000. I've only had it probably a year and a half, so it probably would at least break even, if not maybe sell it for $30,000.

Okay, and then the boat, what is that worth?

The boat, um, I would probably— it probably is about $120,000 or maybe $140,000, and I owe $90,000 on it.

Oh, I thought you said $40,000 is owed on the boat. Okay, so you owe $90,000 but it's worth $140,000. That's a nice boat.

Yes.

Okay, and you think you could get $140,000? Because that could clear a whole lot and give you some profit back to knock out— you could knock out the car and keep it if you wanted Mm-hmm.

Right.

And then the SBA loan is the giant one, right? That just one big debt?

Right.

And couldn't you throw $10,000 or $12,000 a month at that and knock that out in almost—

Well, that's what I'm trying to do.

A little less than 2 years?

Because I really want to get rid of that. I'm trying right now. I've been putting about $5,500 into my retirement. And so I, I don't know if I should put less into that and pay more to the debt.

Yes, I would.

I would, I would stop those contributions altogether and put it all towards the debt. Because if you can put— if you said $10,000 to $12,000, if you could bump that up to $15,000 by really cutting back your lifestyle, I mean, gosh, you could knock that out so quickly. And then you could put that same amount into retirement, right?

Because is the SBA loan like $70,000? That—

no, it's, um, well, $95,000.

I thought I heard you say $190,000. Did I get something wrong?

That's—

well, that's what the boat—

Oh, that's everything together. Okay, great. Even better.

Okay, so think about it this way. If you just had the SBA loan of $90 grand and you threw $15 at it a month, you'd be done in 6 months.

Perfect.

So think about that. You sell the boat, you could profit— you're telling me $50 grand, which would knock out the car completely and still leave you with another $20 grand to throw at the SBA loan. Now we're down to $70 Right?

Correct.

So 4 and a half months, you throw $15,000 at that SBA loan, in 4 and a half months you're completely debt-free if you pause retirement. So what we're talking about is not pausing retirement forever. We're talking 4 and a half months, you pause retirement, get to a place where you have some financial foundation, no debt, get yourself an emergency fund, and then think about how much you could sock away in your investments if you had no debt making $32,000.

Okay.

So this is—

you're gonna be just fine here because it's been okay. And having only the $329,000 in my, uh, retirement—

Well, if you turn around and do— if you do what George said and then you take the $10,000 that you were throwing at the debt, even just $10,000 of it, and you put that away every month—

If you put $17,000 away every month into investments, that's $200,000 a year.

Yeah.

That's crazy. That's just your contribution. That's not even the compound growth over the next 10 or 20 years. So Laura, I'm telling you, if you get focused and you follow these baby steps, knock out consumer debt, that's it. That's all you're doing. Get the emergency fund of 3 to 6 months in place. That's all you're doing. Then baby step 4 is 15% of your income. And if you don't have a mortgage, if you're completely debt-free, then you can bump that up to 25, 30, 40, 50% of your income to catch back up on retirement. So very solvable problem because of your amazing income. Get focused and call us back when you're debt-free. We'll celebrate with you. Michael is up next in Stillwater, Oklahoma. What's going on, Michael?

Oh, just working away.

I feel you. How can we help today?

Um, so a few months ago, my wife and I decided to get a house built, and so we just signed a contract. a little over a month ago to start that process and they started on it. And then, so within a year of that, they told us is when we'll have to get our traditional mortgage and we'll need a down payment at that time. And then a few weeks ago, she got diagnosed with cancer and they're going to have to amputate her right leg.

Oh.

And she's not going to be able to work for 6 months, give or take. Um, so that takes away a large majority of our income and I don't know how we're going to be. I, as far as monthly bills, my job should be able to hopefully sustain everything, but I don't see how we're going to have money for a down payment now.

Yeah.

And then the other thing is I, our house won't actually be complete either Because in that loan, I told them not to worry about drilling a well for water. I was going to pay for it out of pocket. And then not to worry about running electricity because I've got a friend who's an electrician and I was going to pay for that out of pocket and get a deal. But now I don't know. The well would have been about $10,000. Electric's a couple thousand. And then about $60,000 for the house down payment, which we— I don't see how we're gonna be able to make that work now.

Yeah.

How much debt are you currently in?

Um, about $50,000.

Is that the construction loan?

No, nope. That is, that is a car and student loans and a tractor.

Okay.

What are you in for the construction loan so far?

The total cost at the end will be $304,000.

That'll be the total cost.

Okay.

And where are we at in this process? You said you're under contract. Is there a way you can negotiate a stop with the, with the builder on this?

I—

not that I'm aware of. I talked to them a little bit and they basically told me we're screwed. They, they gave me— when we started the process, they gave us a backup plan, which is very possible, I guess, at this point. Um, and it is a full loan mortgage. It's a 30-year mortgage at a 10% interest rate.

Ouch.

Oh gosh.

Which just sounds absolutely terrible to me.

So—

And what was the down payment they needed from you?

What I was going to do is go through another company for the mortgage. We wanted to do like a 15-year mortgage.

Okay.

And now we're kind of out of options from what I can see. I really don't want to spend, you know, a million dollars on this house after interest and stuff.

Yeah. I mean, there's just, there's a lot of dominoes here that are gonna fall.

Yeah.

So I would be trying to do anything I can to get out of this deal. And even if that's gonna cost you some, it's still cheaper than what's on the other side of this. So I would be talking to maybe a real estate attorney to see what the heck did you sign? What will they be willing to negotiate if there's an amendment to the agreement to maybe even just pause this build or get out of it completely? Can you pay him 10 grand to call it good and you sell the lot? I don't know what all those details will be.

Maybe you can pause if nothing really big has started yet. Maybe you can pause and sell the, sell the plot and somebody else can pick up where you left off. I'm not sure.

That's a best case scenario. Otherwise you're gonna be working your tail off and I would be selling this car and tractor and getting out of as much debt as you can in the meantime. Cuz we don't know what the future holds. But man, we are rooting for you guys and praying for your wife.

Hey guys, Dave Ramsey here. Every day on this show, we help people work through real money problems and figure out what to do next. Now you can get that same kind of help anytime, It's time with Ask Ramsey. Ask your money question and get answers built on Ramsey principles we use on the show. Whether you're making a decision or just want something explained, Ask Ramsey is here to help. It's fast, simple, and free to use. Go to ramseysolutions.com and try Ask Ramsey today. That's ramseysolutions.com.

In the lobby of Ramsey Solutions, on the debt-free stage, we have Chad and Michelle. How are you guys?

Great. We're doing great.

How about you?

Thanks for joining us. You brought the debt-free t-shirts to match. Love it. In your Ramsey blue. That's fantastic. How much debt did you guys pay off?

$268,933.

Wow.

Nice.

Love it. And where are you guys from?

Bristol, Vermont.

Love it. And what kind of debt was the $268,000?

Credit cards, car loan, tractor loan.

Mortgage?

Mortgage!

I knew it was coming. Did you just sneak that in there, Chad?

I knew it.

That's amazing.

Oh, wow. That's great. Fantastic.

Okay, $268,000. And how long did that take you guys?

5 years.

Wow.

That's impressive. And what was the range of income?

It was $90,000, and we ended at about $140,000.

So you obviously paid off the student, uh, the, the consumer debt, student loans, tractor, all that, and then you just decided, you know, we're just gonna go right on through. Did you keep that same intensity?

Well, we kept the same intensity for a while.

What happened? It sounds like something changed. Go ahead.

Well, the gazelle intensity started off pretty well. Gazelle intensity. She was certainly Definitely going off the start of it, I was kind of more like a laying down gazelle to start with. And then I finally got up and I was keeping up with her.

Wow.

So you were the reluctant spouse?

I was. I was. I was. Yeah, I'm the spender and she's the nerd. And it, it took a while for me to get on board. But once I started going to the classes and seeing what the outcome would be, it's like, yeah.

Was that the turning point for you, was going to Financial Peace University with her?

Correct.

How did you even— how did you convince Michelle to actually go to the class? Every spouse wants to know, how do I get this gazelle to get up off the grass?

Well, we— I— this started in 2019. I had, um, I was doing our bills thinking I was like, had a budget in my brain, and I was like, I don't know how we're doing this. I mean, I just don't know how we're doing this. And our youngest was graduating that year, and it was like, we have no money for her for college.

Wow.

And I was like, that's it, I got to do something. And in 2019, we had done a school trip, and we actually went to Kentucky to run the Kentucky Derby Marathon. And on the way there, I saw a billboard with Financial Peace on it, and I was like, I wonder what that is. And I didn't think anything about it. And then in December, I saw our local Front Porch Forum had an advertisement for a Financial Peace class.

Wow.

Okay, this is a sign.

So serendipitous.

Yeah, so I took it and my oldest daughter was gonna go with me and she kind of bailed on me. And so Chad felt guilty, really, is why he went with me.

So the second week of class I end up going, and then we went through the rest of them. Wow.

And this was during COVID so we had 2 in-person classes and then we were—

that was it.

All remote.

Then we were all remote.

I remember that. I was hosting a class at that point and we started together and then we ended up going remote. That's so funny.

Right.

Wow.

Wow.

Okay, so it was a slow start, but then things ramped up, and it sounds like your income went up. What do you guys do for work?

I'm a paralegal.

I'm a mechanical assembler.

Fantastic. So what happened to the income over those 5 years? Was it just natural promotions and raises?

Yes.

And I worked a lot.

Wow. Absolutely. Very, very cool. So the house has paid off. What, what's been the hardest part through this journey? Once you guys really understood what it's going to take to make it happen, you get focused, you get What became the hardest part day in and day out?

Patience.

For me, sticking to the budget and, and not getting the wants.

Yes.

You know, so there's the needs, gotta have those.

Yeah, what were those sacrifices for you, Chad, that you were like, I can't spend money on this for the foreseeable future until we're out?

You know, if for some reason I thought I need a new pair of running shoes, just can't go out and buy a pair of running shoes.

Yes.

Either you budget for the next month or you make do with what you have. There's one thing I didn't sacrifice. My beer budget was always in there every month.

Your budget remains intact.

Don't mess with the beer budget.

That's correct.

That's what's keeping Chad going right now. That's hilarious. Okay, so what's the house worth?

Uh, $530,000, around $530,000.

Awesome. And how much do you guys have in your nest egg and retirement accounts?

$1.4 million.

Oh my gosh.

Oh, I love it. Baby Steps millionaires.

That is why. So you guys did a really good job investing your whole life, but you were also kind of collecting debt and being normal along the That was the smart thing we did, was invest in our retirement. Yeah, you don't get to $1.4 million accidentally. And you guys still have a long life to live, which means that money's gonna double, triple, quadruple.

We're hoping so.

Wow.

It'll at least double.

Well, I mean, every 7 years, if the stock market's about 10% average, every 7 years it'll double. And you guys could live a good, what, at least 30, 40 more years, right?

Well, we're a lot older than you think we are.

You guys look 48 as the crow flies.

It's all the marathon running.

Chad looks older, I will say that. He's got a Dave Ramsey look to him.

Thank you.

I'll take that as a compliment.

Well, he's younger. I robbed the cradle.

Wow.

Okay.

So you guys are, uh, far past Baby Steps Millionaires, but now you're doing things intentionally. Did you have any cheerleaders along the way?

Our 2 daughters were our cheerleaders.

And you brought them here with you. Did they learn along the way? Because I mean, they're older now. They saw mom and dad do this journey.

They were older when we started.

Did they think you guys were crazy, or were they on board?

I believe— They probably think we're crazy.

I believe so. I believe that's mutual.

They thought you were crazy before though, it sounds like. So nothing changed.

Yes, but just more poor.

Well, we had to say no to them a lot.

Well, yeah, because you said the college was the crux of this whole thing. So how did that end up— tell us the end of the story. What'd you end up doing?

Well, we actually sold a— we had to undo some of the stupid that we could. Yeah. So we had bought a piece of property, of course, on a home equity loan.

Man.

And so we sold that.

Yeah.

And that money helped pay for her first year of college.

Good.

Worth it.

Good.

Very much worth it.

You want to bring them on stage?

Yes.

And tell us their names and ages.

This one is Sydney, and she is 25.

Awesome.

This one is Ariana, and she is 30.

Oh, wow. And a family tree changed just like that. And so did their inheritance. That changed too.

Well, they didn't know that number until now.

Uh-oh.

They're like, what?

Mom and Dad are old? Sleep with one eye open. Yeah.

Well, the good news is you got a lot of time to enjoy it. And, you know, the character traits are passed down now. Sacrifice, perseverance, patience. And Chad now gets to spend a little more on the beer budget. I would imagine.

No, that's still pretty tight.

Okay.

I love this so much.

So what's next for you guys?

You're in Baby Step 7, the house is paid for. What are you looking forward to in life?

Well, traveling more. We've run marathons, so we— I have 4 more states left, and so that's the next 2 years is to—

Are you gonna do one in every state?

We've done— I've got 4 more left.

Holy smokes, that's wild.

And what are the last 4 states?

Idaho, Minnesota, Wyoming, and Colorado.

Holy cow, that is amazing. Wow, so inspiring.

You're only like 46 ahead of me, so I'm gonna catch up one of these days.

That's incredible.

Oh my goodness.

You guys are excellent.

What do you tell people the key to becoming debt-free is? How do we become like Chad and Michelle?

My theory is you need to stick to the budget. You make a budget every month and you stick to it, and it works. Because I, to start with, I was a non-believer, but I'm a believer now.

I want to sing it so bad. I'm a believer now. There it is. All right, how about you, Michelle? What was the key for you?

I think the biggest— the first step to me was admitting there was a problem. And then, you know, then the budget, working as a team, and getting both of us on board. I mean, if he wasn't on board, I would have tried to do it, sure, but it made it so much easier and simpler with him being on board.

Just sheer grit. But you probably would have been very resentful along the way.

Oh, I would have taken forever.

Guilty. Oh my goodness. Yeah, working together is a different story.

the beer budget.

Oh man. We use— we have this no button, so we use the no button a lot.

Hit it for us. What does it sound like?

There's different ones, but they sound like Dave.

I've seen this before. Yeah.

Oh, is it actually Dave Ramsey?

It's not, but it sure does sound like him.

I think it is.

That's fantastic.

That's his side job, recording.

So I heard that a lot.

I'd ask her a question and she said she hit the button a lot. Well, you said no for 5 years and you get to say yes for the rest of your life because of the position you've put yourselves in. We're so proud of you guys. All right, here we go. It's Chad and Michelle and their daughters Ariana and Sydney from Bristol, Vermont. They paid off $268,000— the credit cards, the car loan, the tractor, the house and everything— in 5 years making $90,000 to $140,000. Count it down, let's hear a debt-free scream.

3, 2, 1.

We're debt-free!

Michelle is jumping for joy. You would have thought she won The Price Is Right.

I mean, look at her. She's run marathons in 47 states.

I wish I had a—

those legs can jump.

That's true. I wish I had a Broyhill dinette set to give her as a prize, but instead they get to be on the debt-free stage, which some say is even better. Hey guys, George Campbell here. You ever feel like you make good money and still have nothing to show for it? You run into Target for one thing and somehow walk out $87 later with toothpaste and emotional support candles? Just me?

Okay.

Okay.

Well, that's the problem. Most people don't pay attention to how they spend their money, so it does whatever it wants. And that's why we created EveryDollar. It's a budgeting app that helps you create a simple plan for your money. EveryDollar's simple, it's clear, and it helps track where your money's actually going. Plus, you get daily lessons, to-dos, and reminders along the way. It's like having a money coach in your pocket. Your money's been freelancing long enough. It's time to give EveryDollar a full-time job. Go download EveryDollar for free on the App Store or Google Play. Our scripture of the day, 1 Corinthians 9:24. Do you not know that in a race all the runners run, but only one gets the prize? Run in such a way as to get the prize. Sarah Blakely said, don't be intimidated by what you don't know, that can be your greatest strength and ensure that you do things differently from everyone else.

I love that. Hey, the 1 Corinthians made me think of something in that Debt-Free Scream, talking about running. We talk about gazelle intensity all the time. I think we should take a minute and explain that because if you've been rocking with us for a while, you're like, oh, gazelle. Like, we throw out phrases a lot, but that's one of those that if you're listening for the first time, you're like, what the heck were they talking about? What is gazelle intensity?

You talking about laying down like a gazelle?

So, you know, we, we talk about getting out of debt and doing it with intensity. And there are villains out there, there are predators out there. That's how we consider debt. Debt is the lion. It is the, the apex predator that is chasing after you. And gazelles are able to outrun a cheetah or a lion that can, you know, have a burst of speed. But a gazelle, if you can run fast enough for long enough, you can outrun them. And so being like a gazelle and running fast and for a long period of time will get you out of debt. So that's kind of the crux. I could never explain it the way Dave does with, with his fury.

Yeah, well, I'll read you the original scripture Dave stole this from. You know, he plagiarizes a lot. So this is from Proverbs 6. It says, my son, if you have put up security for your neighbor, if you have shaken hands and pledged for a stranger, aka debts, you have been trapped by what you said and ensnared by the words of your mouth. So do this, my son, to free yourself since you have fallen into your neighbor's hands. Go to the point of exhaustion and give your neighbor no rest. Allow no sleep to your eyes, no slumber to your eyelids. Free yourself like a gazelle from the hand of the hunter, like a bird from the snare of the fowler.

There it is.

Poetic.

Yes.

That's some intensity right there.

It is.

It is. You gotta go hard in the paint.

No sleep to your eyes, no slumber.

I like that.

I know. That's right.

That's gazelle intensity, if you ever wondered. All right, Elle is in Detroit, Michigan, up next. What's going on, Elle?

Hey George, hey Jade, how are you guys doing?

Good.

Did I get it right or is it Ellie?

Nope, you got it right.

Boom, first try. Okay, how can we help today?

So I'm trying to figure out what to do with a pile of money that I have, um, just lower the cost of living that I, I'm dealing with.

Oh wow, okay. How much do you have?

Um, well, I have like $100,000 in a safe in my house. Gangsters. And I'm expecting like, yeah, It's stupid. I know. I'm expecting like $28,000 more in about 6 weeks.

How are you getting this? Where is this money coming from?

Can you legally tell us?

Like, we are weird people. So like, we breed dogs and this is all through over like 4, 4 years. So I clean houses for a living and I get a lot of tips. My husband buys and flips cars and like furniture.

Okay.

And so, it's just like whatever cash we get, I mean, obviously, we claim it. And then, if it's tips, I don't think you have to claim that. But it just sits in the house. But I'm thinking I should probably do something with that because it's not doing anything. And then, our monthly mortgage payment increased due to taxes. And I'm pregnant with our first child. So, I'm kind of—

Yay!

Yeah, excited, but very, very scared for the future.

Why are you scared for the future? Do you guys have debt or is there something that's not secure about your life?

Um, no debt.

Nope.

The only debt that we have is the house and we owe $298,000 on the house. Um, and we're both self-employed. So like I said, I clean houses. Um, my income is steady, but I plan to quit working once I have our child. And then my husband, he, um, He's a painter, and so it really ebbs and flows with the season. Some months he'll make like $2,000. Some months he'll be able to bring in like $10,000 to $20,000 on like a high season. So I think that's one of the reasons why I'm just really unsure is because like you said, that lack of security and really knowing.

What's the mortgage payment every month?

Well, it was $2,450, and as of March, it's now $2,995.

Ooh, yeah, that did go up.

I have no idea. You know, I think it's taxes, even though like we've only been living here for 2 years, and I know that they kind of reassessed the value and up.

Yeah, on the assessment. Yeah, I was just making sure there wasn't anything else but taxes and insurance that can do that.

What do you bring in every month? You said his could be anywhere from $2,000 to $10,000, and on a good month, $20,000. What's yours look like cleaning houses?

Um, so like on paper it it's $3,000, but sometimes like with tips it's like $4,000.

Okay, so the good news is you have like $128,000, it sounds like, that's to your name, uh, and we can do a lot with that. The bad news is I think that it might be worth it for you guys to figure out what an exit plan looks like for you to exit out of your income and into his in a way that makes it feel secure. I think that that's what the crux of this call is.

Yeah, I agree.

Can he find something— can he find something to do in the slower seasons? I mean, he sounds like a real handy guy. Are there other things he can do where he could keep business up to be— because really what you want, you got $3,000 in a mortgage, you want to be bringing home about $12,000 a month in order to make this all work and have some cushion to breathe, invest, save for your kids' college, all of that.

Mm-hmm.

Um, so I mean, yeah, it's, it's one of those things where the things that he can do, um, it's unpredictable, you know? Like, we just bought a car like 3 days ago that was $2,000 we paid, and it's worth like $7,000. So I mean, it's like we can, we can just— we have 12 cars.

Crazy.

Wow.

And you just sell them off?

Yeah.

Is he just flipping them?

If you knew how much money in Pokémon cards we have, that'd be—

Oh my goodness.

I like that you guys are resourceful. I like that you find Awesome. Ways to make money. I think that's very cool. I think that what would really help is to lower your monthly expenses a lot and to make sure that you have a fair amount of savings. So 6 months of expenses, I would not do 3 months, I'd do 6 months for you guys. And I would treat your money like a real estate agent or somebody who is, uh, has variable income like that. And I would always make sure I have an extra month's worth sitting there so that I always know that I have enough to cover the bills. So essentially you're always 1 month ahead. I would recommend that for you. And honestly, if you guys have no debt, I'd probably keep— I'm not exactly sure what 6 months would be for you, but let's pretend it is $28,000. So you keep the $28,000 there in your emergency fund. You guys start the process of investing, Baby Step 4, and maybe you take this $100,000 and you throw it on the mortgage. Maybe you recast the mortgage so that it's not such a big chunk of your life.

Mm-hmm. I was thinking about doing that, but honestly, I've been burnt with every person that I called, whether it's the mortgage company or just some, some person I know who's a lender. I feel like I've been burned and everybody's just looking out for themselves. And, you know, there's refi and obviously there's like closing costs and you start—

Not if you recast.

Recast might cost you a couple hundred bucks.

Yeah.

So you're not actually doing a refinance. They're just recalculating the payment based on the new balance and keeping all the other terms the same. And if you want a trusted partner of ours, reach out to Churchill Mortgage. And they can walk you through that and tell you if it makes sense for your situation. But I like that plan to give you guys some breathing room and cushion. But either way, we need to put this in an actual high-yield savings account, not in a safe. Yeah, inflation is eating away at that money right now. You're telling me. Even if it's physically safe.

I know.

So I would put it in a high-yield savings. We have another partner, Fairwinds. You can go to fairwinds.org/ramsey. They have a smart bundle just for our fans. with a great high-yield savings account. And you can actually have up to 10 savings accounts in there. So what I would do if in your shoes, Elle, is have a peaks and valleys fund with your variable income. So on a great month, he makes $10,000 or $20,000, let's park a bunch of that in that peaks and valleys fund so that if he has a $2,000 month, we can pull from that instead of our emergency fund.

I see. Okay, that sounds like a good game plan for sure, especially with my— the income reduction coming up once I have the baby.

Yes, that, that's gonna give you a whole lot of peace instead of going, oh my gosh, our expenses are still the same, but he only made $2,000 this month. What are we gonna do? Go flip some cars real quick. You need some simplicity and peace in your life as this baby enters the world. And so I'm wishing you guys the best on that journey.

Thank you so much, you guys. I really appreciate the clarity. I sometimes just need a straight path forward.

Yeah, absolutely. That's what we're here for. That's one thing we got you.

That's all I know how to do.

A clear plan, straight path.

I love it.

The baby steps.

Love that.

Man, but the good news is there's a lot of good things happening here. You know, when you don't have a bunch of consumer debt, you have a pile of money, even if it's physically in a safe. That's a while. Usually you hear that from the, you know, the 78-year-old man with tin cans in his backyard. Rarely from a, you know, a young couple.

Yeah. I mean, I would do it.

But, you know, you get that distrust of the banking system and go, ah, But you gotta spread it around.

You gotta have a little here, a little there, a little—

At least it's insured in the bank.

Yeah.

You know what I mean? If someone comes up middle of the night, takes that safe, you're out. But FDIC insurance, NCUA insured, if you're with a credit union like Fairwinds, go check it out. Remember, there's ultimately only one way to financial peace, folks. That's to walk daily with the Prince of Peace, Christ Jesus.